Hi, This is Qadir A.K, Crypto lover, and Research Columnist.
Welcome Readers to the next chapter of my writing series, ‘The Cryptocurrency Breakthrough 2020 – Synopsis 21’ – Cryptocurrency Regulations in Vietnam
Cryptocurrency arrived in Vietnam in 2009, and the likes for Bitcoin, Ethereum, Litecoin and Ripple started to appear in the form of an alternative for cold hard cash. People were in search of different ways to transfer and receive money from the overseas bank account without any hassles & heavy fees and found a better option in Cryptocurrencies.
Vietnamese Government on Cryptocurrencies
Vietnam is one of the fastest-growing economies in the world with a good G.D.P. The government has made a clear vision to provide comprehensive support for the use of digital technologies in the country assuring the local blockchain and crypto companies with necessary requirements.
Did You Know!!! About half of the startups in Vietnam are from the blockchain and crypto sector in 2019 which is expected to propel even more in 2020.
In addition to this, the Vietnamese state authorities are working on the possible applications of blockchain technology in the country.
Blockchain for Vietnam’s Cashless Society
The deputy Prime Minister of Vietnam, Vuong Dinh Hue signed out a policy decision in 2017, setting out the government’s plan to reduce the cash transactions in the country to less than 10%. The State Bank of Vietnam also announced the development of $700 million cashless payment network in collaboration with South Korean payment service provider Alliex.
Another bank, Tien Phong Commercial Joint Stock Bank(TPBank) moving one step further in the use of blockchain technology, joined hands with Japan’s SBI Ripple Asia to develop Ripplenet blockchain-based global payment network for processing cross-border transactions.
Blockchain-based Smart City in Vietnam
The Vietnamese government in 2017, launched its smart city project with the aim of developing Ho Chi Minh and Hanoi cities into Smart Cities by 2020 and 2030 respectively. The smart city project would be built with technologies like blockchain, 5G and facial recognition.
Cryptocurrencies are not considered as legal means of payment in Vietnam but are allowed to buy, hold and trade. The government authorities are still reevaluating their approach towards the crypto space. However, the country’s central bank has clearly stated that it does not consider them as legal tenders.
What led to look over the need of Regulations?
The government of Vietnam cites many official reasons for the need for regulations and ban them as a means of payment,
- The crypto industry has no government supervision and therefore prone to illegal activities.
- Cryptocurrencies lack customer protection as they are volatile in nature which leads to price instability, security concerns, and market manipulation.
- Cryptocurrencies are open to illegal activities such as tax evasion, money laundering, terrorist funding and hacking.
- The cryptocurrencies might possess the capacity to destabilize existing financial systems which can affect the nation’s economy.
The Regulatory RoadMap of Cryptocurrencies
Vietnam has made several efforts to regulate the country’s cryptocurrency space. On 21 August 2017, the Prime Minister, Nguyen Xuan Phuc approved a project to complete the legal framework for managing digital assets and their activities.
On April 11, 2018, a directive was issued to the relevant authorities to manage crypto transactions in order to analyse the negative impact on the nation’s economy. In the directive, Bitcoin and similar cryptocurrencies were banned for using them as a mode of payments for any goods or services. But the users were free to invest in Cryptocurrencies. Those who found guilty would be penalised with a fine up to VND 200 million ($ 9,000).
In February 2019, The Ministry of Justice, a government agency responsible to develop and implement rules and regulations in the country, also filed a report that reviewed the current legislation on crypto-related business in the country. They proposed three different policies that the government could consider and start working on the policy selected by the government. They are,
- Floating and lax Regulatory approach
- Straightforward approach
- Legislation of digital Assets transactions under specific conditions.
Recently on May 11 2020, the Vietnamese Finance Ministry has approved to establish a research group to review, analyse and develop various regulatory policies around crypto-assets. The research group would be comprised of nine members of the group of the following departments,
- General Department of Taxation
- National Institute of Finance
- General Department of Vietnam Customs
- Department of Banking and Financial Institutions of the State Bank of Vietnam
The research group would be led by the Vice-Chairman of State Securities Commission, Pham Hong Son.
Taxation and Mining
Taxes on Cryptocurrencies
As you have already aware of the fact that, Bitcoin and other cryptocurrencies are not considered as legal tenders and are banned to use them as a mode of payment, the tax policies are also not framed yet.
The tax authorities have lost a lawsuit against a local citizen who was been taxed on the Bitcoin earnings. As the cryptocurrencies are not considered as a legal asset under Vietnamese law, the court ruled the authorities that they have no right to tax him.
Mining of Cryptocurrencies
The Cryptocurrencies remain illegal as of now and restricted with the use of payment methods and so the mining. It is also considered illegal The government has also has passed a law which bans the import of bitcoin mining equipment into Vietnam.
However, the Ministry of Industry and trade expressed displeasure towards the ban and also showed concern over the decline in the mining business. The ministry sent a proposal to the Prime Minister of Vietnam, called the Document 5964 / BTC – TCHQ, mentioning that the mining pieces of equipment are not listed in the banned list of import or unsafe list. Hence the import should be allowed which was accepted by the government.
Series of Events
11-05-2020:- Vietnam Government establishes a research group to review and access the crypto assets and also develop a regulatory framework for digital assets.
17-11-2019:- Japan SBI Ripple Asia and SBI Remit announced a partnership with Vietnamese Commercial Bank Tien Phong Commercial Joint Stock Bank, in developing Japan-Vietnam Money transfer service using RippleNet DLT.
12-11-2019:- The State bank of Vietnam (SBV) is working on a new decree to regulate cryptocurrencies.
26-07-2018:- The State Securities Commission tightened its approach towards the cryptocurrencies. It banned public companies, securities companies, fund management companies, and securities investment funds from dealing with digital assets and its activities and required them to obey legal regulations on anti-money laundering law.
19-07-2018:- The government accepted the suspension of the import of the crypto mining equipment which was proposed by the Ministry of Industry and Trade.
13-04-2018:– Following a fraud that resulted in a loss of $ 15 Trillion Vietnamese Dong ($ 658 million), the Vietnamese government issued a directive to government ministries and, the central bank to tighten the cryptocurrency activities in the country.
28-10-2017:- The State Bank of Vietnam and The Central bank of Vietnam banned the use of digital currencies as a mode of payment which would be effective from the start of 2018. However, there was no ban on the investments on the digital currencies.
27-02-2014:- The State Bank of Vietnam issued a warning against investing in cryptocurrencies or carrying out any transactions due to harmful risks involved in criminal activities. It also determined that virtual currencies are not considered as legal tenders.
The Vietnamese Government has now acquired a progressive approach towards regulating the cryptocurrencies and initiated various steps. The various other approaches, however, are still vague and lack clarity.
More laws and reforms are required to ascertain the secured flow of cryptocurrency transactions in the country so that no scams or fraud occur risking the investor’s funds. The future of the cryptocurrencies are more secure and reliable in the country when these regulatory frameworks are put in place.